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Solana vs Ethereum: Key Metrics and Costs to Consider

Last Updated December 20, 2023 11:51 AM
Teuta Franjkovic
Last Updated December 20, 2023 11:51 AM

Key Takeaways

  • Solana has overtaken Ethereum in key metrics like DEX volumes, NFTs, address activity, and stablecoin transfers.
  • Running Solana nodes is 5x more expensive than Ethereum, despite higher throughput.
  • Costly nodes and developer gaps raise concerns about Solana.
  • Firedancer client release aims to further decentralize and scale the network.

Ethereum (ETH) and Solana (SOL) stand as two leading altcoins that have significantly contributed to the growth of cryptocurrency. Ethereum pioneered the use of smart contracts, introducing a new realm of possibilities in blockchain technology. Following this, Solana took these advancements further by significantly enhancing scalability, thereby expanding the potential applications and efficiency of blockchain-based solutions.

In a recent analysis , Ryan Watkins, co-founder of Syncracy Capital, shed light on Solana’s rising prominence in the blockchain space, particularly in areas where Ethereum previously held dominance.

Solana Is Rallying; Key Metrics Swell

Watkins, in tweet , highlighted that Solana has overtaken Ethereum in several critical metrics. These include

  • Decentralized exchange (DEX) volumes.
  • Non-fungible token (NFT) trading volumes.
  • The number of active addresses.
  • Transaction count.
  • Stablecoin transfers.

The swift change in Solana’s metrics comes at a time when the network has become a focal point for developers and traders alike. In recent trading months, the price of SOL, Solana’s native token, has experienced a significant uptrend. It has successfully breached key resistance levels, leading to the establishment of new highs for 2023.

Solana USDT
Credit: TradingView

The surge in SOL appears to be a catalyst for increased on-chain activities on the Solana network, as evidenced by the rise in transaction counts and metrics like the total value locked (TVL). Since September, SOL has seen its value more than triple from its lows.

Correspondingly, the network’s decentralized finance (DeFi) TVL, according to data from DeFiLlama , has grown significantly, surpassing $1 billion. This marks a more than threefold increase from its July 2023 levels, which were around $270 million.

Solana DeFi
Credit: DefiLlama

Solana’s growing preference among users and developers is largely attributed to its architecture and scalability, enabling cost-effective transactions and smart contract deployments. A key aspect of Solana’s design is its reliance on independent nodes, which are incentivized for participation. This helps foster both decentralization and security within the network.

Cost Of Operating Nodes, Decentralization Comparison Arises

While Solana’s decentralization has been a topic of debate, Watkins points out that Solana operates with approximately 40% of the nodes that Ethereum has. A significant distinction, however, is the operational cost of Solana’s nodes , which are about five times more expensive than those of Ethereum. According to Watkins’ analysis, the network bears this higher cost in exchange for its throughput capabilities.

Data from Syncrancy reveals that running an Ethereum node costs around $550, whereas operating a high-end node on Solana’s Firedancer platform can exceed $5,100. Despite the higher cost, Solana’s nodes offer a substantial increase in throughput, with a transaction per second (TPS) rate of 55,000, compared to Ethereum’s 100 TPS. This difference is a key factor in the shift towards Solana, despite the higher costs associated with its nodes.

Solana Vs Ethereum
Credit: X

The higher the Nakamoto Coefficient, the more decentralized a network is considered to be.  As of December 19, the Nakamoto Coefficient stands at 21 for Solana, indicating no recent change. In comparison, Ethereum’s coefficient is 2 according to Nakaflow data , suggesting that Solana is more decentralized than Ethereum. BeaconScan reports there are more than one million Ethereum nodes  currently, while Solana Compass notes more than 2,900 Solana nodes .

Ryan Watkins, defending Solana, points out that decentralization involves more than just the node count and geographic distribution. He emphasizes the importance of diversifying Solana’s developer ecosystem and integrating features like light clients for cost-effective user verification.

Solana’s upcoming release of the Firedancer validator client is intended to further diversify and bolster the network’s robustness and reliability. Notably, this client will enable nodes to produce blocks more rapidly, enhancing the network’s capacity to process a larger volume of transactions on-chain. This development is a step towards scaling the mainnet without relying excessively on off-chain solutions.

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